March market update and investment risks

The following reflects the general views of our Treasury & Investment Office (T&IO) and should not be taken as a recommendation or advice as how any specific market is likely to perform.

These views are as at the end of March 2026.

The value of investments can go down as well as up. Investors could get back less than they put in.

Please remember that past performance is not a reliable indication of the future performance.

Overview

The conflict in the Middle East and the accompanying spike in energy prices was the main event and significantly altered the macroeconomic landscape. Prior to the start of the conflict on 28 February, global economic activity had been resilient and the disinflationary trend remained on track. However, as the conflict continued through March, the disruption to global oil and gas supplies, caused by the closure of the Strait of Hormuz, raised the prospect of higher inflation and a potential slowdown in economic growth, so-called stagflation. As a result, major developed market central banks kept interest rates on hold and investors began to anticipate interest rate hikes instead of rate cuts.

In the UK, headline inflation fell to 3.0% year-on-year in February, from 3.4% in December. However, with petrol prices rising in March, inflation is expected to rise. The UK economy expanded by just 0.1% in the final three months of 2025, , while gross domestic product (GDP) grew 1.4% annually in 2025. 

The US economy was more robust, with GDP growing 2.1% in 2025. However, the economy expanded at an annual rate of 0.7% in the fourth quarter, which was much lower than expected. In February, the annual inflation rate was 2.4%, slightly above the Federal Reserve’s 2.0% target, but higher US gasoline prices are expected to push up future inflation readings. 

This view was supported by eurozone inflation data, which saw annual inflation rise 2.5% in March from 1.9% in February.

Equities (or shares)

UK equities were positive, outperforming global equities. Share prices advanced initially, amid expectations of interest rate cuts. The FTSE 100 reached an all-time high, approaching 11,000 points. However, markets declined in March as the conflict in the Middle East drove fears of rising inflation and economic slowdown. 

US stockmarkets declined in the first quarter and underperformed the broader global market and other regions, such as emerging markets, Asia and the UK. This was driven, in part, by the ongoing trend of investors rotating away from US equities.

Shares started positively, however, retreated as the conflict in the Middle East and energy price rises raised inflation worries. The market was also rattled by concerns that new artificial intelligence (AI) products might threaten a range of industries. In addition, investors began to question the continued high levels of investment in AI infrastructure and the potential return.

European equities fell - their first decline in five quarters. The year started positively, however, there was an abrupt shift in March when the Middle East conflict rattled markets. 

The Japanese stockmarket rose strongly in January and February but saw a sharp sell‑off in March.

What do you mean by Equities?

• Equities are commonly known as "shares". When a fund buys a company share, it is investing in a company and, in exchange, receives a share of the ownership of that company. Shares give two potential investment benefits:
  
  
  • share prices may increase as the value of the company increases.
    
    
  • companies may pay dividends - regular payments made to shareholders based on how well the company is doing.

What are the general risks of this type of asset? 

• Over the longer-term (over 10 years), equities are considered to offer greater growth potential than many other asset types. However, the value of any investment can go down as well as up and so there is a higher risk of losing your original capital than investing in fixed interest securities (see below).

• The financial results of other companies and general stock market and economic conditions can all affect a company's share price, and consequently the value of any fund investing in that company.

Fixed interest

The price of UK government bonds (gilts) fell 1.9%, underperforming both US Treasuries and European sovereigns. The yield of the 10-year UK gilt rose to 4.9%, from 4.5% at the end of 2025.

The quarter was uniformly negative for global government bonds, as markets digested the implications of the conflict in the Middle East. 

The Federal Reserve held interest rates steady as the central bank noted it was “too soon” to know how the conflict would affect the outlook. The 10-year US government bond return fell 0.1%, while US corporate bonds fell 0.4%. 

Gilts were among the weakest performers among developed market government bonds, and, while German bunds fared better, they were still in negative territory, as were most European government bonds. Japanese government bonds were also weak.

What do you mean by Fixed Interest?

• Fixed interest securities, more commonly known as "bonds", are loans issued by companies or by governments in order to raise money.
  
  
• Bonds issued by companies are called Corporate Bonds, those issued by the UK government are often called Gilts or UK Government bonds and those issued by the US government are called Treasury Bonds.
  
  
• In effect, all bonds are IOUs that promise to pay you a sum on a specified date and pay a fixed rate of interest along the way.
  
  
• Index-linked securities are similar but the interest payments and redemption value are normally increased by a price index e.g. for UK government index-linked securities, interest payments and redemption value are increased in line with the UK Retail Price Index.

What are the general risks of this type of asset

• On the whole, investing in Government or Corporate Bonds is seen as lower-risk than investing in equities. To date, no UK government has ever failed to pay back money owed to investors. But with Corporate Bonds there is a risk that the company may not be able to repay its loan or that it may default on its interest payments.
  
  
• Corporate and Government bonds are sensitive to interest rate trends. An increase in interest rates is likely to reduce their value, and hence the value of any fund investing in them.

Property

For the three months to end-February 2026 (“the review period” and the latest available data at the time of writing), capital values for All UK commercial property rose by just 0.1%, according to property consultant CBRE. However, this was an improvement on the previous three-month period to end-November 2025, when capital values fell by 0.5%. Capital values rose in retail and industrials but fell marginally in offices. Including rental income, the total return over the review period was 1.4%. Total returns were positive across all three main sectors – retail, offices and industrials, with retail being the strongest. Rental values grew in all three sectors in the three months, but was strongest, by far, in industrials.

What do you mean by Property?

• For our funds we would mean commercial property investment. This generally means the fund is sharing in the returns from the ownership of some buildings (for example, offices and shopping centres).
  
  
• The value of the property may increase and tenants may pay rent to the owners of the building.

What are the general risks of this type of asset

• Property can be difficult to buy and sell quickly. Fund managers may have to delay withdrawal of money by customers from a property fund until they can sell some of the buildings the fund invests in.
  
  
• The actual value of a property is what someone is prepared to pay for it - an actual sale value. As sales are infrequent, interim valuations are based on a valuer's opinion and may be revised up or down from time to time. This can affect the value of a fund invested in commercial property, with the value possibly fluctuating significantly and could result in an investor not getting back the amount they originally invested.
  
  
• This leads to a number of risks for funds investing in property:
  
  
  • Cash could remain uninvested as property assets can be difficult to buy, leading to lower returns than expected.
     
  • The value of the fund may be reduced if a large number of withdrawals are requested and it is necessary for properties to be sold at reduced prices.
    
    
  • There may be delays removing your money from the fund if property cannot be sold.
    
    
  • Property fund valuations may be revised periodically, upwards or downwards.
    
    
  • Rental income is not guaranteed. Defaulted rent and unoccupied properties could reduce returns.
    
    
  • If the size of the fund falls significantly, the fund may have to hold fewer properties, and this reduced diversification may lead to an increase in risk.